AMP, CommInsure revealed as insurance laggards with new tool

The data shows AMP took the longest to process claims across nearly all categories of life insurance in the year-long reporting period.

Consumers who purchased death cover or total and permanent disability (TPD) cover with AMP through group superannuation waited an average of 8 and 9.5 months respectively to have their claims processed. That compared to industry averages of 1.3 months for death claims and 3.5 months for TPD claims.

An AMP spokesperson said it acknowledged there had been “some instances where we have taken too long to assess some claims and continue to improve processes to address this”.

AMP had one of the highest claims acceptance rates in the industry and paid out, on average, more than 95 per cent of all claims, the spokesperson said.

The Commonwealth Bank’s insurance arm, CommInsure, had the highest ratio of disputes lodged where insurance was purchased independently or through a financial advisor.

For income protection insurance purchased through a financial advisor, CommInsure received 240.8 disputes per 100,000 people insured almost double the industry average of 129.9.

For total and permanent disability insurance CommInsure’s disputes rate was 49 per 100,000 people insured compared to an industry average of 27.7, and for trauma insurance it was 74.7 versus and industry average 37.9.

The number of disputes lodged for accidental death or injury claims when cover was purchased directly through CommInsure was four times the industry average, at 40.7 per 100,000 people compared to industry average 9.6.

CommInsure also paid out just 23.2 per cent of those claims, compared to an industry average of 81.2 per cent.

A CommInsure spokesperson said at the time of the report they had “announced a large remediation and closed two major products, which contributed to a spike in complaints across the board”.

Australians need to know that the insurer will pay out when they make a claim.

Consumer Action Law Centre’s Gerard Brody

“APRA and ASIC’s publications provide more transparency for consumers to help them make more informed choices about their life insurance cover and provider,” they said.

CommInsure has refunded millions of dollars to customers after a Sydney Morning Herald and The Age investigation revealed a series of issues at the insurance giant including that it was relying on out of date definitions to deny claims.

Consumer Action Law Centre chief executive Gerard Brody said the data showed “some policies are much poorer value than others”.

He said the ASIC tool was a welcome intervention to protect consumers buying life insurance.

APRA executive member Geoff Summerhayes.Credit:Chris Pavlich

“Australians need to know that the insurer will pay out when they make a claim and for the first time this data will provide them with this critical information, and help them to avoid nasty surprises,” Mr Brody said.

Australian Prudential Regulation Authority executive Geoff Summerhayes said accidental injury and death cover, funeral cover and consumer credit insurance, particularly when purchased through the direct market, produced the “more challenging outcomes for consumers”.

He said the life insurance industry was initially uncomfortable about the process but had “come to the view this is an opportunity to tell a different story about their performance”.

“The industry has gone through a pretty tough time, in some cases with good reason, but as always, you get into a negative narrative about something and that’s not the whole story,” he said, noting that 92 per cent of nearly 130,000 claims in 2018 were paid in the first instance.

The tool’s data will be updated every six months but does not provide the full picture for consumer decision-making: users cannot compare insurance premiums, exclusions or costs of products.